Facebook Should Expand Diversity of Board, California Fund Says

Facebook Inc. should diversify the makeup of its directors before a planned share sale because companies with varied boards perform better than those with “homogenous” ones, the second-largest U.S. public pension said.

The California State Teachers’ Retirement System also said in a Feb. 7 letter to Facebook Chief Executive Officer Mark Zuckerberg that the social-networking company should expand the size of its board. The $144.8 billion fund based in West Sacramento, California, has invested in Facebook through two partnerships, wrote Anne Sheehan, the pension’s director of corporate governance.

“We are disappointed that the Facebook board will not have any women members,” Sheehan wrote. “This is particularly glaring in view of the fact that Facebook is going public at a time when there is clear evidence that companies with diverse boards perform far better than the companies with more homogenous boards.”

Larry Yu, a spokesman for Menlo Park, California-based Facebook, didn’t immediately respond to a request for comment left after regular business hours.

Calstrs has a history of pushing for changes at companies. It lobbied last year to get corporations to disclose their political donations. In 2009, the pension sent a letter to 300 of its largest portfolio companies asking them to let shareholders have an advisory vote on executive compensation.

Zuckerberg controls 56.9 percent of voting power at Facebook, which filed last week to raise $5 billion in an IPO.

“We realize that Facebook will be a controlled company in which the public stockholders will have little influence, but when the company’s mission and subscriber base are considered, a diverse board makes good business sense,” Sheehan said.

“We strongly encourage you to increase the diversity of your board prior to the IPO.”